November 9, 2009

• By Tom Gentile, ProfitStrategies.com
• On 9:47 am EST, Monday November 9, 2009

Note: This week's Market Outlook was covered by Optionetics.com's Chris Tyler.

Bulls kick off the market's "best six months" with a percentage bid courtesy of a three-week corrective move and a handful of well-received corporate motivators. For the five-day period, the SP-500 (SPY) is up 3.45% on suspect volume and facing more challenging tea leaves despite historically friendly tendencies.

THE WEEKLY NUTSHELL

• A "Moooving Monday" in volatile up, down and up action netting bulls a positive doji finish. Mostly oversold technical platform and trifecta of easier to cheer economic beats from ISM, pending homes and construction aid early bid. Ford (F) drives bulls higher with its surprise profit and sales beat. Intraday malaise can be blamed on Dollar (UUP) strength within a multiday consolidation, while late day "MOOyah!" bid can be chalked up to the "Invisibull Hand."
• "Tepid Tuesday" laced with inside candlestick volatility as bulls and bears collide. Headlining for the Bovinus Optimus, Buffet's Berkshire announces "all in" premium bid of $100 for Burlington (BNI), while Stanley Works (SWK) courts Black & Decker (BDK) with a premium dowry. Cognizant's (CTSH) strong and organic results. Countering a spirited doji decision, multiple downgrades to chip sector (SMH, INTC, ALTR, SNDK, XLNX, KLAC and ARMH), lay-offs at J&J (JNJ) and dollar breakout in front of FOMC decision as investors sense era of tighter money.
• "All Fed Up Wednesday Humper" as bulls give up optimistic gains to finish mixed. Early cheer for a pressured Greenback and slightly worse but expansion ISM Services and "trending in the right direction" ADP (UN)employment data fuel move. In second half, mostly "give 'em what they want" status quo monetary policy message of low rates for extended period and inflation expectations muted sends bulls packing nonetheless to finish session technically weak below 50-SMA in bearish gravestone doji.
• "Turnaround Thursday" by a more productive bull. Upbeat forecast and earnings beat from Cisco (CSCO) and surprisingly strong report on productivity highlight percentage gainer to fresh five day highs and undoing last Friday's technically nasty on "Dow 10K!" celebration. SIA counters Tuesday's bearish semi call with its 10.1% sales growth forecast for 2011 and weekly claims data offer's slightly less crummy unemployment lines.
• Almost another "GOOG" Friday for profit-taking. Ugly double digit 10.2% unemployment surprise puts the "sell-e-bration" into "Dow 10K!" out-the-gate. Analyst boosters for GE (GE), Amazon (AMZN), Macy's (M) and Traveler's (TRV) spotlight for bulls managing to prod their way to lighter and below average fractional gains to close the week on a potentially bearish high note.

ON TAP THIS WEEK

Slowing momentum and potential topping discussed in the Technical Picture section below, has been the motif operandi during the course of the Q3 earnings season. The market action comes despite the occasional "wow factor" reaction to a handful of apparently less influential index heavyweights. For those keeping count, Thomson First Call has 80% of the 88% SP-500 components beating Street estimates by an average surprise factor of 15%.

Despite the waning importance of corporate results, there are more than a few names of interest that have in days past and days present, sparked the fancy of momentum traders, as well as several of those "diminished" titans of commerce reporting. Confessionals this week represent a diverse body of industry groups, with the retail sector being well-represented in the latter part of the week.

The listing below looks to encapsulate a solid cross section of those traits for trader's radars. Of the grouping, heavy machinery giant Fluor (FLR) which reports Monday evening should be of interest to traders. The company is expected to earn $0.90 per share versus last year's $1.01 per share.

The Mad Money noted on Friday that Fluor should see "some infrastructure stimulus in the fourth quarter, making it a stock to watch." In the week's second half, Dow components Wal-Mart (WMT) and Walt Disney (DIS) spearhead for investors pondering consumer's ability to take out their wallets in the country's confirmed jobless recovery.

Economic watchdogs will be allowed to take a breather from last week's relative torrid and influential swath of reports. That front of course finished with Friday's disappointing double digit unemployment report. As much, investors are largely going to be left to their own devices as far as having officially-sanctioned motivators.

Unofficially, radars will be focused on the movements in the closely-watched US Dollar as it attempts to reverse its year-to-date downtrend, glittering Comex Gold (GLD) at fresh all-time highs and some drilling in Black Gold (USO) late in the week on demand concerns linked to the weak jobs data.

Weekly Calendar of Key Reports

Monday:
Economic NA
Earnings Dish Network (DISH), Energy Conversion (ENER), TBS Int (TBSI), Tesoro (TSO), Trex (TWP), DigitalGlobe (DGI), Duoyuan Water (DGW), Electronic Arts (ERTS), Fluor (FLR), GT Solar (SOLR), Home Inns (HMIN), MBIA (MBI), McDermott (MDR), Mindray (MR), Priceline (PCLN)

Tuesday:
Economic NA
Earnings Beazer (BZH), Diana (DSX), Fossil (FOSL), Harbin (HRBN), JA Solar (JASO), Tyco (TYC), Zhongpin (HOGS), A123 (AONE), Bob Evans (BOBE), Pan Am Silver (PAAS), Weight Watchers (WTW)

Wednesday:
Economic NA
Earnings Macy's (M), Flowers Foods (FLO), Applied Matls (AMAT), China Green (CGA), Computer Sciences (CSC), Ctrip.com (CTRP), Dendreon (DNDN), Green Mtn (GMCR), KongZhong (KONG)

Thursday:
Economic Weekly Claims, Crude Inventories, Treasury Budget (-$150B)
Earnings Aecom Tech (ACM), Alliant (ATK), Kohl's (KSS), Urban Outfitters (URBN), Wal-Mart (WMT), Blockbuster (BBI), Copa (CPA), Microsemi (MSCC), Nordstrom (JWN), Disney (DIS)

Friday:
Economic Import / Export, Trade Balance (-$31.9B), Michigan (71.8)
Earnings Abercrombie (ANF), Agilent (A), JC Penney (JCP), Teekay (TK), Yingli Green (YGE), Sina (SINA)

TECHNICAL PICTURE

Figure 1: S&P500 (SPY) Daily H&S Topping

A weekly break of an ascending wedge developed from the March lows managed a snapback rally from a well-oversold market sporting its most severe corrective testing since July. Five days later and prices in the SP-500 are up nearly 3.50%. The action has the daily chart shaping up as a possible H & S topping pattern and confirming a less optimistic existing weekly view of the market. Low volume levels during the rally only solidify the bear case at this juncture.

For the bulls, all isn't lost. Monday marks Day 5 of a potential FTD or follow-through day window. The intermediate term bullish catalyst used by IBD would be a first confirmation of sorts for growth traders to see the market as a healthier environment for breakout candidates. The period from November through April also marks "the best six months" for investing historically and by a very wide margin. In saying that, this strategist is more inclined to focus on "sell-e-brating Dow 10K!" and a potential right shoulder under development.

MARKET LAB

Bullish Technicals

• Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Weekly Inverse H & S being breakout from October lows. "MM" of 113 - 120.
• Day 5 of FTD window per outfits like IBD.
• November thru April strongest six months for equities historically.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• Fourth time the charm? Potential W5 Daily and W4 Weekly in SPY.
• At 65%, market's run has "Come a long ways, baby." Green Shoots priced in.
• Mostly long-term overbought market conditions/weak internals.
• Confirmed "Extended" 13-week topping as part of 13-5-15 cycle.
• Q3 "Recession is over" data confirmation.
• Estimated minimum corrective support zone 99.50 - 102 testing.
• Five day weaker volume rally off lows = countertrend and slightly overbought entry.
• H&S pattern resistance 107.40 - 108.15 SPY. RSI 14 confirmation.
  

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.